Rs3.01trn defence budget proposed

ISLAMABAD: The federal government on Friday proposed a defence budget of Rs3.01 trillion for FY2026-27, marking an increase of 17.7 percent over the budgeted allocation of Rs2.558 trillion in the outgoing fiscal year, as Pakistan seeks to strengthen military preparedness, modernise capabilities and address evolving security challenges.

Budget documents show the allocation for Defence Affairs and Services has increased by nearly Rs453 billion year-on-year.

Compared with the revised expenditure estimate of Rs2.596 trillion for FY2025-26, the allocation is higher by about 15.9 per cent.

The defence allocation accounts for roughly 17.2 per cent of total current expenditure of Rs17.495 trillion and nearly 16 per cent of the overall federal expenditure outlay of Rs18.771 trillion. Based on the government’s projected nominal GDP of Rs143.6 trillion, defence spending amounts to around 2.1 percent of GDP.

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A detailed breakdown indicates that employees-related expenses will consume Rs967.5 billion, compared with Rs846 billion budgeted last year. Operating expenses have been allocated Rs743.5 billion, up from Rs704.4 billion, while civil works will receive Rs363.2 billion, compared with Rs336.5 billion in FY2025-26.

The most significant increase is in physical assets, which have been allocated Rs925.8 billion, up from Rs663.1 billion a year earlier — a jump of nearly 39.6 per cent. The sharp increase suggests a stronger focus on military modernisation, procurement of equipment, capability enhancement and replacement of existing assets following heightened regional tensions and ongoing operational requirements.

The budget also earmarks Rs10.9 billion for defence administration. Meanwhile, allocations under Public Order and Safety Affairs have been increased to Rs389.5 billion from Rs351.7 billion last year, with spending on police and civil armed forces rising to Rs350.4 billion, reflecting continued emphasis on internal security and counter-terrorism operations.

Beyond the headline defence allocation, the government has provided Rs10.9 billion for the Defence Division and Rs980 million for the Defence Production Division under the Public Sector Development Programme (PSDP), taking their combined development allocation to nearly Rs11.9 billion.

However, the budget brief does not separately disclose the operational budget of the Defence Production Division. The PSDP funds are aimed at infrastructure development, equipment upgrades and other strategic projects.

The budget documents do not separately disclose allocations for the Strategic Plans Division (SPD) Force, which is responsible for the security of Pakistan’s strategic assets.

However, strategic-sector spending shows notable increases. The Pakistan Atomic Energy Commission (PAEC) has been allocated Rs40.66 billion under the PSDP, up sharply from Rs22.42 billion last year, while SUPARCO has received Rs11.57 billion. These allocations underscore continued investment in Pakistan’s strategic, nuclear and space-related capabilities.

Other defence-related allocations spread across the budget include Rs22.96 billion for Federal Government Educational Institutions in Cantonments and Garrisons, Rs1 billion for the Pakistan Maritime Security Agency (PMSA) and Rs1.315 billion for the Airports Security Force (ASF). These allocations, though outside the main defence services head, contribute to the broader national security framework. The government has also budgeted Rs1.169 trillion for pensions, including Rs822 billion for military pensions up from Rs742 billion in the outgoing fiscal year, showing an increase of Rs80 billion or 10.8 per cent. Military pensions are accounted for separately and are not included in the Rs3.01 trillion defence allocation.

The rise in defence spending comes as Pakistan continues counter-terrorism operations, border management efforts and military modernization programmes while maintaining operational readiness in a volatile regional environment. At the same time, the government has targeted an overall fiscal deficit of 3.6 per cent of GDP and a primary surplus of 2 per cent of GDP, underscoring the challenge of balancing security imperatives with fiscal consolidation. In absolute terms, defence remains the second-largest expenditure head after debt servicing, reaffirming its central place in the federal government’s spending priorities for FY2026-27. Defence analysts said the increase reflects operational and modernisation requirements rather than any major shift in force posture. They noted that Pakistan continues to face a complex security environment, including conventional deterrence requirements on the eastern border and counter-terrorism commitments on the western front, while much of the budgetary increase is likely to be offset by inflation and higher operating costs.

In regional comparison, India has allocated ?7.846 trillion for defence in FY2026-27, including pensions, while Bangladesh’s defence allocation stands at Tk42,462 crore. Pakistan’s proposed defence allocation of Rs3.01 trillion is equivalent to around 2.1 per cent of GDP, broadly comparable to India’s defence spending at around 2 per cent of GDP, though India’s economy and absolute defence outlay remain substantially larger.

Copyright Business Recorder, 2026